Credit Card Legal Questions: Answers You’ve Been Looking For

Credit cards are a very social topic these days. In simple twitter searches, we find conversations about points, debt, collections, payments, interest rates and more! However, one thing I’ve noticed in these different streams of conversation is that several questions tend to go unanswered. Unfortunately, it seems as though these are by far, the most important questions that can be asked. You know, the legal questions! Well, if you’ve been on the search for answers to the most popular legal questions about credit cards, you’re in luck. Here are the answers you’ve been looking for…

Can My Lender Legally Close My Credit Card Without Notification?

When it comes to your credit score, there are several different factors that come into play. Some of the most influential factors have to do with how you handle revolving balances. Mainly, how you handle credit cards! Some factors that determine how you handle credit cards are the amounts of time each card has been opened, total number of revolving accounts and debt to available credit ratio. By closing an account, a lender can reduce the average age of credit cards, reduce the number of revolving accounts and increase the debt to credit ratio for the consumer that had the account. So, the big question is, can lenders do this without notice?

The Answer…Yes!

There are some things that lenders can’t do without notice but, this isn’t one of them. If a lender deems that you are no longer capable of paying back any more debts, they are free to close your account at will. However, it is not in their best interest to close accounts. Quite frankly, they make money off of debt. The more you have, the more they make! Lenders generally only close accounts when consumers show substantial signs of risk. Things like constant missed or late payments, spending more than the credit limit and dramatic decreases in credit scores.

Can A Lender Increase My Credit Card Interest Rate Without Notice?

Interest rates play a crucial role in the cost of credit cards. The higher the interest rate, the higher the cost of using the card. For those with large balances, an increase in interest rates could immediately cause a financial hardship. So, can lenders do this without notice?

The Answer…No!

As of the passing of the Cardholder Bill of Rights in 2009, lenders must give consumers at least 45 days notice before increasing interest rates on credit cards. Also, according to this act, lenders must give consumers the option to “Opt Out” of the interest rate increase. Therefore, before increasing your interest rate, your lender must send a change in terms notice with a way to opt out of the changes. However, generally when you opt out of a change in terms, you will need to close your account and suffer the negative impact that may have on your credit score.

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This article was written by Joshua Rodriguez, proud owner and founder of CNA Finance and avid personal finance writer. Join the conversation about this article or any personal finance topic of your choice on his Google+!